Everyone has a right to retire, however, retirement is not a handout. Retirement is something that must be planned for and each person’s path in getting there is different. Nonetheless, participating in your employer-sponsored retirement plan is a great first step for anyone. By participating in such a plan, you can:
• decrease your taxable income by making pre-tax salary deferral contributions; and
• increase your retirement savings.
Participate in the plan ASAP!
Join the plan as soon as you can. Many retirement plans have quarterly or semi-annual entry dates. Contact your employer to find out when you can participate and consider joining the plan on the next entry date.
Contribute to the plan
Once you have joined your employer’s retirement plan, review the amount you are contributing to the plan. The maximum annual salary deferral contributions allowed for 2018 are:
• $18,500 to 401(k) or 403(b) plans
• Plus an additional $6,000 in “catch-up contributions” if you are 50 or older by the end of 2018 (total of $24,500)
Get tax credit for your efforts
You may be able to take a tax credit for making eligible contributions to your employer sponsored retirement plan (e.g. 401(k), Roth, 403(b), 457, etc). The amount of the credit you can claim is based on the contributions you make to the retirement plan and your credit rate. Your credit rate can be as low as 10 percent or as high as 50 percent, depending on your income and your filing status.
So, join your employer’s retirement plan as soon as you can and start on your path to retirement.